Collective Actions and Joinder of Parties in Arbitration: Implications of DR Horton and Concepcion


Well over a century ago, legal and policy analysts realized that the days of purely individual action in matters of business and labor were over, and that legal rules must adapt to the social and economic power of large corporations. Among the rules that changed were archaic limitations on joinder of claims and parties in litigation and laissez faire “liberty of contract” doctrines invalidating labor legislation. Recently, lawyers representing large corporate employers have urged a revival of old rules limiting class actions and labor rights. But, as this Article will show, it is not at all clear that their clients will benefit from the legal regime the lawyers have created. As long as employers have large workforces working under uniform policies, they will face dozens or hundreds of similar claims challenging pay practices, discrimination, and harassment. Group adjudication arose to address efficiently the many similar claims that arise when large institutions adopt uniform policies. Individual arbitration of such claims may result in fewer claims being filed, especially if confidentiality provisions keep co-workers from learning from each other about how to assert successful claims. But unless or until employers figure out a way to shift all the costs of dispute resolution onto the claimaints (and thus far courts have resisted such efforts), and to silence all claimants and their lawyers, employers will face many similar claims, will be paying part or all of the costs of lots of identical arbitrations, and will be paying lawyers to handle them separately rather than on a classwide basis.

The National Labor Relations Act (NLRA) protects the right of employees to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The National Labor Relations Board (“the Board”) has long held that protected activity includes asserting claims in courts, agencies, and in arbitration. In D.R. Horton, the Board found the NLRA to prohibit enforcement of an employer-imposed requirement that employees waive their right to bring a collective action challenging their working conditions. On petition for review, a divided panel of the United States Court of Appeals for the Fifth Circuit rejected the Board’s determination, holding that the Federal Arbitration Act (FAA) requires enforcement of the mandatory arbitration agreement, including its class action waiver.

This Article explains why collective action waivers or requirements to arbitrate individually are unenforceable under the National Labor Relations Act and the Norris LaGuardia Act. The Article also explains why arbitration agreements requiring claims to be brought by individuals are not covered by the Supreme Court’s reasoning in Concepcion and Italian Colors to the extent they prohibit joinder of fewer parties than would be required to bring a large class action and, therefore, remain protected by labor law. The Article notes the inconsistency in the FAA cases about whether agreements can waive the right to file charges with some agencies and courts rather than others and therefore critiques the Fifth Circuit’s ruling that the FAA trumps the employees’ rights under NLRA sections 7 and 8(a)(1) to file group actions in court or arbitration but does not trump section 8(a)(4), which protects the right to file unfair labor practice charges. Finally, the Article raises some questions about the practical wisdom of the courts’ willingness to allow employers to require employees to pursue claims only as individuals. State and federal courts universally allow liberal joinder of plaintiffs and defendants because it is more efficient and avoids some truly thorny issues about the preclusive effect of judgments. The Fifth Circuit majority’s assumption, like the Supreme Court majority’s in Concepcion, that individual determination of claims is better suited to arbitration is simply wrong in many cases. Unless employers can opt out of the usual rules for the binding effects of judgments and the usual rules for joinder of claims and parties, the notion that individual arbitration is superior for everyone (including employers) is simply wrong.

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